Montecito occupies the eastern portion of the coastal plain south of the Santa Ynez Mountains. Parts of the community are built on the lower foothills of the range. Montecito however does not include areas such as Coast Village Road, which while usually considered part of Montecito, are actually within the city limits of Santa Barbara. Notable roads spanning Montecito include East Valley Road, Mountain Drive, and Sycamore Canyon Road, all of which form part of State Route 192. In addition, the U.S. 101 Freeway runs along the south end of town, connecting it with other cities in Santa Barbara County and the rest of Southern California.

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The site of present-day Montecito, along with the entire south coast of Santa Barbara County, was inhabited for over 10,000 years by the Chumash Indians. The Spanish arrived in the 18th century but left the region largely unsettled while they built the Presidio and Mission Santa Barbara farther west.

In the middle of the 19th century, the area was known as a haven for bandits and highway robbers, who hid in the oak groves and canyons, preying on traffic on the coastal route between the towns that developed around the missions. By the end of the 1860s, the bandit gangs were gone, and Italian settlers arrived. Finding an area reminiscent of Italy, they built farms and gardens similar to those they had left behind in Italy. Around the end of the 19th century, wealthy tourists from the eastern and midwestern United States began to buy land in the area.[7] It was near enough to Santa Barbara for essential services while still being secluded. Desirable weather and several nearby hot springs offered the promise of comfortable, healthy living, in addition to the availability of affordable land.[8]

The Montecito Hot Springs Hotel was built near the largest of the springs, in a canyon north of the town center and directly south of Montecito Peak, in Hot Springs Canyon. The hotel burned down in 1920; it was replaced a few years later by the smaller Hot Springs Club.[9]

The architect George Washington Smith is noted particularly for his residences around Montecito, and for popularizing the Spanish Colonial Revival style in early 20th century America, as is Lutah Maria Riggs, who started as a draftsman in Smith's firm, rose to partner, and later started her firm.

According to the United States Census Bureau, the CDP has a total area of 9.3 square miles (24 km2), 99.94% of it land and 0.06% of it water.

Montecito experiences a cool Mediterranean climate (Köppen climate classificationCsb) characteristic of coastal Southern California. Because of Montecito's proximity to the ocean, onshore breezes significantly moderate temperatures, resulting in warmer winters and cooler summers compared with places further inland. With its gentle Mediterranean climate, Montecito has long been a desirable location for horticulturists. March and April are the months to watch gray whales migrate north from Mexico through Santa Barbara Channel.[16]

The community is home to the most affluent residents in Santa Barbara County. Most homes are surrounded by walls or tall hedges. Wealthy residents first moved to Montecito in the late 19th century due to the many natural hot springs in the area. An economic boom followed after World War II, further increasing the number of wealthy residents in town.[18]

The Census reported that 8,033 people (89.6% of the population) lived in households, 932 (10.4%) lived in non-institutionalized group quarters, and none were institutionalized.

Of the 3,432 households, 831 (24.2%) had children under the age of 18 living in them; 1,936 (56.4%) were opposite-sex married couples living together, 234 (6.8%) had a female householder with no husband present, 93 (2.7%) had a male householder with no wife present. There were 110 (3.2%) unmarried opposite-sex partnerships, and 36 (1.0%) same-sex married couples or partnerships. 941 households (27.4%) were made up of individuals and 527 (15.4%) had someone living alone who was 65 years of age or older. The average household size was 2.34. There were 2,263 families (65.9% of all households); the average family size was 2.79.

The age spread of the population accounts 1,515 people (16.9%) under the age of 18, 1,234 people (13.8%) aged 18 to 24, 1,169 people (13.0%) aged 25 to 44, 2,716 people (30.3%) aged 45 to 64, and 2,331 people (26.0%) who were 65 years of age or older. The median age was 50.0 years. For every 100 females, there were 87.3 males. For every 100 females age 18 and over, there were 83.9 males.

4,238 housing units represented an average density of 457.5 per square mile (176.6/km²), of which 2,522 (73.5%) were owner-occupied, and 910 (26.5%) were occupied by renters. The homeowner vacancy rate was 2.4%; the rental vacancy rate was 8.7%. 6,081 people (67.8% of the population) lived in owner-occupied housing units and 1,952 people (21.8%) lived in rental housing units.

Out of the total of 3,686 households, 25.7% had children under the age of 18 living with them, 57.1% were married couples living together, 7.2% had a female householder with no husband present, and 33.4% were non-families. 27.0% of all households were made up of individuals and 14.0% had someone living alone who was 65 years of age or older. The average household size was 2.41 and the average family size was 2.85.

The CDP population age distribution was 18.4% under the age of 18, 13.5% from 18 to 24, 16.6% from 25 to 44, 30.0% from 45 to 64, and 21.5% who were 65 years of age or older. The median age was 46 years. For every 100 females, there were 84.7 males. For every 100 females age 18 and over, there were 82.1 males.

The median income for a household in the CDP was $110,669, and the median income for a family was $130,123. Males had a median income of $81,719 versus US$42,182 for females. The per capita income for the CDP was $70,077. About 2.3% of families and 3.8% of the population were below the poverty line, including 2.6% of those under age 18 and 2.2% of those age 65 or over.